What to Say When Clients Want to Know if Art is a Good Investment

Not too long ago I received the following question from gallery owner Steve Harrison:

I had a visitor in my gallery yesterday and asked, “Now because this is original art it won’t depreciate will it?” How does one answer that question. I spend a lot of my time trying to figure out an answer to that question. Of course, a person should buy what they like and no one should ever bank on an “investment” whatever that might be. Still when a person is spending gallery prices for original art, the question “Will this painting retain its value” is a question that deserves an answer. How do other people answer it?

Another variation of this question is “Will this art increase in value? Is it a good investment.” I’ve certainly heard variations of these questions many times from Xanadu clients.

There have been a number of articles in the press and online lately talking about the incredible premiums collectors are making when selling work at auction through Sotheby’s or Christie’s. These articles have added to some art buyer’s perception that art is an investment.

These can seem like difficult questions to answer because the perception is that if we tell the client that the piece isn’t guaranteed to be a good investment, we may lose the sale.

My approach to handling this issue is simple and direct. While it’s certainly possible that the artists I’m working with are going to become wildly successful and have the value of their work skyrocket, I don’t want my clients to purchase worked based on potential investment value. I would certainly never use an artwork’s potential value as a selling point.

In responding to a client who is asking about investment potential, or, as Steve asked, about a work’s likelihood of retaining its value, I take a soft, generic approach. I typically answer by saying something like”

“I encourage collectors to buy art because they love it. If you buy a piece that you love, it will pay dividends to you every day for the rest of your life!”

If pressed further, I’ll add that there is no guarantee of the future value of any piece of artwork. The value can go up, but it’s also possible it might go down.

A client’s ability to reap the rewards of an increase in an artwork’s value will depend on his ability to resell the artwork. If the client tries to sell the work through a gallery, he can expect to pay the gallery a commission, likely around 50%. Auctions charge a lower commission, but are typically most interested in selling the work of blue-chip artists. In other words, buying art with the expectation of making a profit, or even of recovering the initial investment, is very risky. It may take years before a client could hope to sell the work at a price that would cover the initial purchase.

I suppose the prospect of a piece of artwork not being a good investment might dissuade some buyers, but I’ve found that it isn’t a factor for the vast majority of my clients. I would never want to put myself in the position of having a client return to the gallery some years after their purchase to discover that the value of the work hasn’t increased dramatically, and then have them blame me for misleading them.

Art can enrich collector’s lives in so many ways – it brings beauty into their homes and finding and acquiring art can be a great adventure. I’m in the business of providing a venue where people can be exposed to exciting artwork and I strive to create a great buying experience. If a client is looking for an investment, I recommend they talk to their stockbroker!

How do you Answer the Art as an Investment Question?

How have you responded when clients have asked if your art is a good investment or if it will retain its value? Has this been a factor in past sales? Share your thoughts and experiences in the comments below.

I think the answer is a simple one once the client’s motivations are qualified. If it’s an investment, it’s an investment. And like all investments, take for instance stocks or mutual funds, there is a standard disclaimer that goes something like this. “All investments have risk. Past performance is no guarantee of future performance. This investment is not insured against losses.”
At this point, a bit if education on buying and owning art could take place. or a “3 reasons to buy original art” could be recounted. That would be my suggestion.
My other thought is that life itself is built on risk. Liabilities aside, there is virtually no way to insure fool-proof anything including health and well-being. We all do the best we can to minimize the risks to life and limb. It’s not always enough (thinking about the current refugee issue.)

I’d never tell anyone to buy my work cause it will be worth a fortune. I don’t have a crystal ball and I’m not that motivated to lie and cheat people. I just try to concentrate on my work and let the chips fall where they may.

If a person buys a brand new Porsche off the lot, will it retain its value? It’s a quality vehicle. The answer is no, it will depreciate in value the moment the tachometer starts to spin. Will the car retain its value several decades down the road if kept in pristine condition with low miles? The answer is still no, it will likely go up in value because it is now vintage in mint condition. What about a Cadillac, a Dodge Ram, a Nissan Sentra, or a KIA?
If a person purchases the Porsche, Cadillac, or Dodge Ram of art work, and they take good care of it, then they stand a better chance of it retaining its value or increasing its value. If they buy the Sentra or KIA of artwork, and they take good care of it, then they probably got some good use out of it, but it’s not going to retain its original value. Maybe purchasing a Wolf Kahn (i.e., the Porsche of the art world) before he passes on would be a potential investment.

When this question comes up I tell them about my international exhibitions, the medias that talked about me and other achievements. I let them know that I am very committed to my career and that I am doing everything so that their purchase will increase value! This can be said in a sweet humorous way where the truth is said but it is also understood that there is no guarantee. People firstly buy art because they love it, that is also true for many collectors that buy hoping to make an investment.

Thank you for discussion on the challenge of Art Valuation and Art for Investment.
Historically Art Collection belongs only to those who have sufficient funds to pay a reasonable price for an art work from Creatives whose reputation is well established within the cultural era of their time. Initially, Royalty, Aristocracy, Politicians, Patricians, Religions and eventually Merchants were those who supported artists on a sustainable basis. Art Markets did not exist until the Merchant Class developed a predilection for Art especially the Dutch Masters in tandem with RA London and the beginnings of the primary art gallery movement c. 1860s. The print and camera from 1829 onwards provided an opportunity for the working class to enjoy and finance a ‘picture’ as a fond memory of family, friends, and places visited. A

An art work must be ‘unique’ to have cultural relevance, and eventually possible manipulated value by the secondary art markets. Style, perception, challenges, concept, medium, skill are paramount. It is not enough to copy, render, depict. The work must be individual and stand out amongst a plethora of average works.

The long known saying ‘the only good artist is a dead artist’ may be offensive to so many Collectors and Artists – when a specific artist’s production halts due to death of the artist, the work may become more valuable with criteria such as uniqueness, rarity, provenance, public profile, and presence in the world of art and cultural criticisms. In my experience as a practising artist and gallery director, most of those who buy art ‘love the work they buy’ and this is their first motive – encouragement to perceive the work as only a ‘speculative’ item along with chairs, cars and jewellery defeats the purpose of how art can make our lives so much more expansive, inclusive and enjoyable.

I don’t usually get asked about the $value of my work increasing or not when I sell direct. It may be a question given to some of the galleries I have been but I don’t know for sure.
I am fairly certain the vast majority buy my work because love a piece and recognize the values of a high standard, often complex approach in a difficult medium with obvious pride in what I do. Having that commitment to these standards give work the best chance of at least retaining monetary value in YEARS to come. I won’t relax those standards and the years I have been producing works for Gallery, Private and Corporate clients show a consistenty that in itself is valuable. So the Artist as well the Artwork has value and a timeline of production that should encourage the perception of sustainability and endurance beyond the life of the Artist.

Maybe I’m dense, or just ignorant of the situation, but this phrase “articles in the press and online lately talking about the incredible premiums collectors are making when selling work at auction” makes no sense to me. It’s the part that says “collectors are making when selling work” that confuses me, because according to the online definition of “premium auction” it’s the SELLER who is paying a premium to high bidders who didn’t actually acquire the item. In that quote, apparently the collector is selling the work; so how could a collector/seller make “incredible premiums”??

The people who usually ask those questions are ones who have been burned in the stock market or lost venture capital for start ups, real estate, oil and gas, etc. The list is endless, from historically less risky to the truly ridiculous. There are no foolproof investment strategies, including art. It depends if people would prefer to admire a well done painting in their home or drive out to a barren landscape and look at gauges and valves on their gas well. Those are questions for their stockbroker.
Trendy artists who enjoy a surge of popularity, even with their own franchise galleries, then to have their work plummet …. one hopes buyers still appreciate their “investment.” Clever marketing will never make up for art that doesn’t stand up to time. There are enough cases of respected museum curators who sometimes miss. They identify historically significant paintings in their collection only to find out later it was a student of the master or a forgery. If they can’t outguess the art market how can a patron?
Advise a patron to buy what they love and promise nothing but years of enjoyment.

Art can surely be a worthy investment, yet you can no more guarantee a financial return than can a stock broker guarantee the stock market. Investment is inherently speculative and anyone venturing in any such purchase needs to understand that reality. But Art must be first and foremost a personal and subjective selection. It is an intimate daily relationship that will enrich the spiritual and intellectual life of the collector. If that personal element is lacking, you might as well buy commercial real estate.

If the work is well executed, with high quality materials, I don’t think it’s unreasonable to hope for value retention at a minimum. A great increase in value may not be on the horizon but chances are it will long outlast current furnishings. SO, IF IT SINGS TO YOU, BUY IT.
I have some artwork I purchased over 40 years ago and I still consider them personal treasures. What is their value? I have no idea, but to me they’re irreplaceable.

This is a good question that was posed…..people are apt to ask it…and there are many good answers to consider here. Thank you! To buy anything and expect to resell at a profit is an unreal expectation. I encountered this question many more times when I worked in sales at a custom jeweler. Thankfully my art buyers rarely ask this so bluntly.

I haven’the had the investment question very often, but when I did I smiled and told the client that there is no guarantee on the value of any art, just like other investments. However, unlike Picasso, I’ve never had to trade my art for rent, paint or food. If he had known how valuable his paintings would be, even his sketches, he probably would have gotten more for each piece. I advise any client to buy art that they enjoy and want to see in their home.

Most of today’s commercial galleries don’t have the kind of art that serious high roller investors will buy.
The kind of art that is worth investing, even with risks, is from the old masters or the new or modern contemporary artists, specially from Asia and China. And they can only be bought through auction houses or high end art fairs, if you have the money.
Art investment is unregulated, illiquid, with high costs, providing no income and with potentially volatile performance.
It is an entirely false market that can implode any time.
Better to invest in red wine.

It’s sad, but when I go to my local Goodwill store I always see original art. The art world is difficult and if your buying for investment, you really would need to buy from some of the top galleries or be incredibly lucky. Lets face it, only a very very small percentage of artists will make it to the point of art increasing and ending up at auction.

I just had a client ask me yesterday if I was destined for fame so that the painting he had just purchased would go up in value. He also happened to be a long time friend so it was easy to joke about it and I told him he should will it to one of his children. I believe that even an avid collector should by a piece of art because they truly like it and can see enjoyment in looking at it for perhaps many years to come.

On my website I offer to take back my art on a consignment basis. My commission is 50% . I urge customers that may be a little horrified with my big cut to try to sell the art directly first. This service is offered to protect the value of my work, and prevent estate sales, where paintings of mine were blown out the door very low prices.

I tell customers to buy art only if they love the image. I offer giclee reproductions only for that reason, and never predict any future value.